LOWELL BAR ASSOCIATION & another vs. BIRDIE T. LOEB & another.

315 Mass. 176

November 8, 1943 - December 8, 1943

Middlesex County

Present: FIELD, C.J., LUMMUS, QUA, COX, & RONAN, JJ.

Upon an appeal from a final decree in a proceeding under Section 46B,
inserted by St. 1935, c. 346, Section 2, in G. L. (Ter. Ed.) c. 221,
where the record included a report of all the evidence as well as a
voluntary report by the trial judge of "all the material facts," this
court was not limited to the facts recited in the findings of the trial
judge, but could find others from the evidence and, if findings made by
the trial judge were deemed to be plainly wrong, could make findings
contrary thereto.

Statement by LUMMUS, J., with citation of authorities, of occupations and
professions, which are universally recognized as distinct from the
practice of law and in the usual practice of which the giving of advice
or the drawing of documents or performance of other services is not
deemed practice of law prohibited to persons not members of the bar
although done for compensation and involving some element of law or
legal effect or knowledge of law.

Merely advertising through newspapers and by placards a service of making
out simple income tax returns for persons whose income consisted wholly,
or almost wholly, of salary or wages, and the rendering of such service
for compensation, was not the practice of law by persons not members of
the bar in violation of Section 46A, inserted by St. 1935, c. 346,
Section 2, in G. L. (Ter. Ed.) c. 221.

For persons not members of the bar, associated in the advertising and
conducting of a service of preparing for a consideration simple income
tax returns of salary and wage earners, also to advertise the furnishing
for such consideration of "counsel in handling income tax matters should
any develop after the official audit by the U.S. Tax Department during
the year," naming an attorney at law as "legal counsel" and stating that
"we stay with your taxes" and "take care of all correspondence and all
interviews with the tax department," was the advertising of an
undertaking to sell the legal services of a lawyer who was to act for
the association, and was a violation of Section 46A, inserted by St.
1935, c. 346, Section 2, in G. L. (Ter. Ed.) c. 221.

A preliminary injunction expired upon the later entry of a final decree
after a hearing on the merits, and the propriety of the preliminary
injunction was not considered on appeals from both decrees.

LUMMUS, J. This is a petition in equity, under G. L. (Ter. Ed.) c. 221, Section 46B, inserted by St. 1935, c. 346, Section 2, brought by an incorporated association of members of the bar, to restrain the respondents, who are not members of the bar, from holding themselves out as authorized, entitled, competent, qualified and able to practise law, from engaging in the practice of law, and from giving legal advice in respect to liability to pay income taxes and the preparation and execution of income tax returns. See also Steinberg v. McKay, 295 Mass. 139, 142; McMurdo v. Getter, 298 Mass. 363, 364. The petition was dismissed as to the respondent Koch, who was not served with process. The Attorney General was permitted to intervene as an additional petitioner, under the section of the statute cited. From the decree allowing him to intervene, the remaining respondents Birdie T. Loeb and J. H. Friedman appealed. There is nothing in that appeal, and it is not argued. By interlocutory decree entered on March 4, 1943, those respondents were enjoined until the further order of the court "from in any form or manner advertising in the newspapers of this Commonwealth the making of tax returns, from maintaining signs or placards in the windows of the premises at 260 Merrimack Street, Lowell, Massachusetts, and from in any manner practicing law in this Commonwealth." By the final decree, entered on March 15, 1943, those respondents were "permanently enjoined and restrained from advertising a tax service in any form whatsoever, whether in newspapers, placards or signs displayed in their various offices, and from engaging in the making out of income tax returns as a regular occupation and other than the occasional

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drafting thereof and from engaging in the practice of the law in any of its aspects," and were ordered to pay costs. From each decree those respondents appealed. The case is here on a voluntary report of "all the material facts," and a report of all the evidence under G. L. (Ter. Ed.) c. 214, Section 24, and Rule 76 of the Superior Court (1932).

In our consideration of the facts, we are not limited to those recited in the findings of the judge, even though he undertook to find "all the material facts." All the evidence is before us, and all questions of law, fact and discretion are open for our decision. From the evidence we can find facts not expressly found by the judge. If convinced that he was plainly wrong, we can find facts contrary to his findings. Trade Mutual Liability Ins. Co. v. Peters, 291 Mass. 79, 83, 84. Culhane v. Foley, 305 Mass. 542, 543. Marshall v. Landau, 308 Mass. 239, 241, 242. Bernhardt v. Atlantic Finance Corp. 311 Mass. 183. McLaughlin v. Old Colony Trust Co. 313 Mass. 329, 330.

The facts may be summarized as follows: One Louis G. Loeb, an attorney at law practising in Boston, the husband of the respondent Birdie T. Loeb, had an interest in a business of making out income tax returns for wage earners which was carried on in Quincy in 1941, and was then discontinued. In the summer of 1942 he planned to establish a similar business in a number of manufacturing cities. Recent statutes had required income tax returns from many wage earners previously exempt, and the trend was toward a further extension of tax liability. U. S. C. Title 26, Section 51, originally enacted as Act of May 28, 1938, c. 289, Section 51 (52 U.S. Sts. at Large, 476), and later amended by Act of June 25, 1940, c. 419, Title I, Section 7 (a) (54 U.S. Sts. at Large, 519), Act of September 20, 1941, c. 412, Title I, Section 112 (a) (55 U.S. Sts. at Large, 696), and Act of October 21, 1942, c. 619, Title I, Sections 131 (c) (1), 136 (a) (56 U.S. Sts. at Large, 828, 836). For the Victory Tax, see Act of October 21, 1942, c. 619, Title I, Section 172 (56 U.S. Sts. at Large, 884).

To carry out his plan, he organized the unincorporated American Tax Service, with headquarters in Boston which soon after establishment were moved to his law office, and

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with branch offices in Lowell, Lawrence and other manufacturing cities. He is the real owner of the business, although he devotes little time to it. The respondent Birdie T. Loeb devotes all her time to the business, and ostensibly is the proprietor. The respondent Friedman is general manager, and has his office at the Boston headquarters. The respondent Koch was manager of the Lowell branch until succeeded by one Shea. The business has about one hundred employees during the season for income tax returns. None of them is a member of the bar. None of them appears to be an accountant, with the exception of the respondent Friedman.

The American Tax Service does not attempt to make out income tax returns for corporations, partnerships, estates, fiduciaries or business men conducting a business. Its patrons are exclusively persons whose income consists wholly, or almost wholly, of salary or wages. It advertises extensively in newspapers and by signs in its windows. There is little modesty or restraint about its advertising, which is designed to arrest attention and to bring in a large volume of business. Its uniform prices are $2 for a State or Federal return, and $3.75 for both returns. Its "maximum charge for all returns to any one person" is advertised to be the latter sum.

The legal principles underlying this case are now well established. The judicial department of government, and no other, has power to license persons to practise law. Statutes may aid by providing machinery and criminal penalties, but may not extend the privilege of practising law to persons not admitted to practice by the judicial department. Opinion of the Justices, 289 Mass. 607. Keenan, petitioner, 310 Mass. 166. Matter of Keenan, 313 Mass. 186, 196, 204, 205. Note, 144 Am. L. R. 150. As constituted at present, the Massachusetts bar is a unit. Each member may practise in any State court and in any branch of legal work, without regard to his special qualifications in one branch or his comparative lack of them in another. In England, the legal profession is divided, and lawyers may practise only in the branch of work for which

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they have been admitted. Formerly a similar division existed in this Commonwealth. Washburn, Judicial History of Massachusetts, 189, 200, 201. S. J. C. Rules (1806) 2 Mass. 72 , 105. S. J. C. Rules (1810) 6 Mass. 382. St. 1782, c. 9, Section 4. Rev. Sts. (1836) c. 88, Section 23. Pub. Sts. (1882) c. 159, Section 37. G. L. (Ter. Ed.) c. 221, Section 37. The justification for excluding from the practice of law persons not admitted to the bar is to be found, not in the protection of the bar from competition, but in the protection of the public from being advised and represented in legal matters by incompetent and unreliable persons, over whom the judicial department could exercise little control. Matter of Shoe Manufacturers Protective Association, Inc. 295 Mass. 369, 372. See also McMurdo v. Getter, 298 Mass. 363, 366.

A member of the bar is held to a high standard of honor and of ethical conduct. He may not advertise for business or solicit employment. Matter of Cohen, 261 Mass. 484. Matter of Maclub of America, Inc. 295 Mass. 45, 48. Matter of Thibodeau, 295 Mass. 374, 376. Commonwealth v. Brown, 302 Mass. 523, appeal dismissed Brown v. Massachusetts, 308 U.S. 504. But "a member of the bar is free to engage in commercial pursuits of an honorable character and to advertise and to extend his purely mercantile business honestly and fairly by ordinary commercial methods." Matter of Thibodeau, 295 Mass. 374, 376. See also Commonwealth v. Ferris, 305 Mass. 233, 234, 235.

The judicial department is necessarily the sole arbiter of what constitutes the practice of law. Opinion of the Justices, 289 Mass. 607, 614. Matter of Shoe Manufacturers Protective Association, Inc. 295 Mass. 369, 372. State v. Kirk, 133 Neb. 625. People v. Goodman, 366 Ill. 346, 349. Clark v. Austin, 340 Mo. 467, 474, 475. Judd v. City Trust & Savings Bank, 133 Ohio St. 81, 85. It is not easy to define the practice of law. Since it undertakes to determine all controversies as to rights that may arise among men, the law pervades all human affairs. This has become increasingly evident in recent years. Statutes familiar to everyone have made almost every citizen feel the heavy hand of the law, helping him or hampering him, often adding to his financial burdens,

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and markedly increasing his dependence upon experts, especially in law and in accounting.

The proposition cannot be maintained, that whenever, for compensation, one person gives to another advice that involves some element of law, or performs for another some service that requires some knowledge of law, or drafts for another some document that has legal effect, he is practising law. All these things are done in the usual course of the work of occupations that are universally recognized as distinct from the practice of law. There is authority for the proposition that the drafting of documents, when merely incidental to the work of a distinct occupation, is not the practice of law, although the documents have legal consequences. We cite the cases for that principle, and not to approve the application of that principle to the particular facts of the cases cited. Merrick v. American Security & Trust Co. 107 Fed. (2d) 271. People v. Title Guarantee & Trust Co. 227 N. Y. 366. People v. Title Guarantee & Trust Co. 191 App. Div. 165, affirmed 230 N. Y. 578. Gustafson v. V. C. Taylor & Sons, Inc. 138 Ohio St. 392. In re Unauthorized Practice of Law, 58 Ohio App. 79. State v. Rice, 236 Wis. 38, 56. Childs v. Smeltzer, 315 Penn. St. 9. State v. Childe, 139 Neb. 91. Grand Rapids Bar Association v. Denkema, 290 Mich. 56. Cowern v. Nelson, 207 Minn. 642. Cain v. Merchants National Bank & Trust Co. 66 N. D. 746. 16 Am. Bar Assn. Journal (1930) 558. Compare People v. Lawyers Title Corp. 282 N. Y. 513.

For example, an architect cannot advise a landowner properly, or plan for him intelligently, without an adequate knowledge of the building laws and regulations. In practice, an architect prepares the building contract, and drafts the specifications that accompany it and determine to a great extent the rights and liabilities of the landowner. An insurance agent or broker, in order to be of service, must know the legal effect of different forms of policies and of various provisions in them. Often he is the agent of the insured (Commonwealth Mutual Fire Ins. Co. v. William Knabe & Co. Manuf. Co. 171 Mass. 265; Ritson v. Atlas Assurance Co. Ltd. 279 Mass. 385, 392; Fireman's Fund

The work of an accountant necessarily brings him into touch with rules of law which he must understand if his computations and conclusions are to stand the test of possible litigation. He must know the nature and general legal effect of negotiable instruments, patent rights, corporate stock and bonds of different kinds, insurance policies, and other contracts. He must appreciate the distinction between buying goods, and taking them as bailee, agent, broker or factor. He could hardly prepare a correct account for a partnership without a working knowledge of the main principles of the law of partnership. [Note p182-1] In preparing an account for a trust estate, he must understand the difference between principal and income, and the rules of

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law governing the allocation of receipts and expenses to the one or the other. [Note p183-1] Income taxes have produced a flood of judicial decisions and departmental rulings with which he must have adequate acquaintance, even though he merely works with figures and does not draft tax returns. A sharp line cannot be drawn between the field of the lawyer and that of the accountant. Some matters lie in a penumbra. But any service that lies wholly within the practice of law cannot lawfully be performed by an accountant or any other person not a member of the bar.

Plainly the commencement and prosecution for another of legal proceedings in court, and the advocacy for another of a cause before a court, in cases relating to taxes as in other cases, are reserved exclusively for members of the bar. [Note p183-2] Doubtless the examination of statutes, judicial decisions, and departmental rulings, for the purpose of advising upon a question of law relative to taxation, and the rendering to a client of an opinion thereon, are likewise part of the practice of law in which only members of the bar may engage. Rosenthal v. Shepard Broadcasting Service, Inc. 299 Mass. 286, 289, 290. In re Petition of the Grievance Committee of the Bar of New Haven County v. Payne, 128 Conn. 325. Crawford v. McConnell, 173 Okla. 520. Mandelbaum v. Gilbert & Barker Manuf. Co. 160 Misc. (N. Y.) 656. Application of New York County Lawyers' Association, 43 N. Y. Sup. (2d) 479. Compare Elfenbein v. Luckenbach Terminals, Inc. 111 N. J. L. 67.

When we pass beyond those propositions we enter debatable ground. The present case does not require us to delimit either the practice of law in tax matters or the right

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of persons not admitted to the bar to engage for compensation in the business of assisting others in such matters. It would be unwise, and perhaps unfair to future litigants, to enunciate at this time broad principles not necessary to the decision of the case before us.

Specifically, we do not deal at this time with the validity of Rule 1 of the Massachusetts Appellate Tax Board which purports to give to a certified public accountant the right to practise before that tribunal, or with the question whether a person not a member of the bar may be allowed to practise before any administrative tribunal in this Commonwealth. If such practice by one not a member of the bar is the practice of law, no rule of such a tribunal can legalize it. The statutes of this Commonwealth give to a certified public accountant no right not possessed by other accountants and other persons generally, except the right to style himself "certified public accountant." G. L. (Ter. Ed.) c. 112, Sections 87D, 87E. Whether practice before an administrative tribunal in tax matters is the practice of law has been the subject of decisions elsewhere that appear to be in some conflict. [Note p184-1]

Neither do we consider at this time whether the permission granted to certified public accountants and other persons not members of the bar to practise in tax matters by the rules [Note p184-2] of the United States Treasury Department and

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of the administrative tribunal (Helvering v. Rankin, 295 U.S. 123, 131; Higgins v. Commissioner of Internal Revenue, 312 U.S. 212) now called the Tax Court of the United States, can have the effect of granting by implication to holders of "Treasury enrollment cards" a right to perform in this Commonwealth services in connection with Federal taxes which in their nature are comprised in the practice of law. It may deserve consideration whether the rules of a Federal administrative tribunal can legalize acts done in the States in matters not actually before the tribunal, though of a class that might eventually come before it. Matter of Lyon, 301 Mass. 30, 34-36. De Pass v. B. Harris Wool Co. 346 Mo. 1038.

Moreover, we do not decide at this time whether considering, or advising upon, questions of law only so far as they are incidental to the preparation for another of an income tax return may constitute the practice of law where the return is more complicated than were those in the case before us, and the questions of law as well as of accounting are correspondingly more difficult and important. [Note p185-1]

Confining our decision to the case at bar, we find the respondents engaged in the business of making out income tax returns of the least difficult kind. The blank forms furnished by the tax officials for that class of returns are made simple, and are accompanied by plain printed instructions. The forms may appear formidable to persons unused to mental concentration and to clerical exactness, but they can readily be filled out by any intelligent taxpayer whose income is derived wholly or almost wholly from salary or wages and who has the patience to study the instructions.

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We are aware that there has been said to be no difference in principle between the drafting of simple instruments and the drafting of complex ones. People v. Lawyers Title Corp. 282 N. Y. 513, 521. Paul v. Stanley, 168 Wash. 371, 377, 378. But though the difference is one of degree, it may nevertheless be real. Irwin v. Gavit, 268 U.S. 161, 168. Rideout v. Knox, 148 Mass. 368, 372. Smith v. American Linen Co. 172 Mass. 227, 229. There are instruments that no one but a well trained lawyer should ever undertake to draw. But there are others, common in the commercial world, and fraught with substantial legal consequences, that lawyers seldom are employed to draw, and that in the course of recognized occupations other than the practice of law are often drawn by laymen for other laymen, as has already been shown. The actual practices of the community have an important bearing on the scope of the practice of law. People v. Alfani, 227 N. Y. 334, 339. People v. Title Guarantee & Trust Co. 227 N. Y. 366, 377, 379.

We think that the preparation of the income tax returns in question, though it had to be done with some consideration of the law, did not lie wholly within the field of the practice of law. See Shortz v. Farrell, 327 Penn. St. 81, 92; Blair v. Motor Carriers Service Bureau, Inc. 40 Pa. D. & C. 413, 422, 429, 430; Gustafson v. V. C. Taylor & Sons, Inc. 138 Ohio St. 392; Crawford v. McConnell, 173 Okla. 520, 523; In re Eastern Idaho Loan & Trust Co. 49 Idaho, 280; 73 Am. L. R. 1323; In re Matthews, 58 Idaho, 772; 111 Am. L. R. 13, and note at page 29; Note, 125 Am. L. R. 1174, et seq. The final decree should not have enjoined the respondents from preparing such returns.

But though the permanent injunction which was granted was too broad, a final decree for the petitioners was required by facts that remain to be stated. For the small fee charged, which was advertised as "the most any one taxpayer pays us," patrons were promised "counsel in handling income tax matters should any develop after the official audit by the U.S. Tax Department during the year." The "legal counsel" was advertised to be Louis G. Loeb. Patrons were promised that "we stay with your taxes." Signs in the

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windows stated, "We take care of all correspondence and all interviews with the tax department. ATS stays with your taxes. Its services are available to you throughout the year."

We think that what was promised patrons was not the recommendation or the payment of a lawyer who would serve them in the direct and usual relation of attorney and client, as in Matter of Thibodeau, 295 Mass. 374, 378. What the respondents advertised and undertook to do was to sell the legal services of a lawyer who was to act for the American Tax Service. That was unlawful under Matter of Maclub of America, Inc. 295 Mass. 45, and Matter of Shoe Manufacturers Protective Association, Inc. 295 Mass. 369, whether done by an attorney or by a layman. Although Louis G. Loeb was the undisclosed principal, the respondent Birdie T. Loeb as the ostensible proprietor bound herself by contract to sell legal services. Groce v. First National Stores Inc. 268 Mass. 210, 213, 214. Norfolk County Trust Co. v. Green, 304 Mass. 406, 409. The respondent Friedman assisted her in that violation of law.

The respondents testified that after an interlocutory hearing on February 24, 1943, they decided not to perform their contracts to furnish legal services. But we do not find that there was a genuine and permanent change of policy. Their decision was never made known to patrons. Their testimony does not require the denial of injunctive relief. Compare Matter of Thibodeau, 295 Mass. 374, 376; Rosenthal v. Shepard Broadcasting Service, Inc. 299 Mass. 286, 290, 291.

A question has arisen as to the proper disposition of the appeal from the interlocutory decree granting a preliminary injunction. In the equity practice of this Commonwealth, interlocutory and final decrees, but no other judicial acts, are appealable. Fusaro v. Murray, 300 Mass. 229. Rowe v. Bragg, 300 Mass. 298. Carilli v. Hersey, 303 Mass. 82, 87. Broomfield v. Checkoway, 310 Mass. 68, 70. Fields v. Othon, 313 Mass. 115, 118. An appeal from an interlocutory decree does not suspend the execution of the decree. G. L. (Ter. Ed.) c. 214, Section 26. Such an appeal lies dormant until brought to this court with an appeal from the final decree, and cannot

When a final decree is entered, a preliminary injunction has served its purpose. If the plaintiff is then deemed entitled to an injunction, the final decree can provide it. The final decree becomes effective as soon as entered. The final decree is vacated (New York Central & Hudson River Railroad v. T. Stuart & Son Co. 260 Mass. 242, 248, and other cases cited below), and proceedings under it are stayed (G. L. [Ter. Ed.] c. 214, Section 19 [Note p189-1]), only upon the conjunction of two things, (a) an appeal therefrom seasonably claimed by one having a right to appeal, for if claimed too late or by one without right the appeal will be dismissed, leaving the final decree in full force (Campbell v. Howard, 5 Mass. 376; Rice v. Nickerson, 4 Allen 66; Snow v. Dyer, 178 Mass. 393, 396, 397; Madden v. Madden, 279 Mass. 417; Dockray v. O'Leary, 286 Mass. 589; Barnes v. Barnes, 291 Mass. 383, 388; Weston v. Fuller, 297 Mass. 545; Graves v. Manzelli, 299 Mass. 615; Golden v. Crawshaw, 302 Mass. 343; Bolster v. Attorney General, 306 Mass. 387); and (b) the entry of that appeal in this court. [Note p189-2] Carilli v. Hersey, 303 Mass. 82, 84. Nelson v. Bailey, 303 Mass. 522, 526. Dudley v. Sheehan Construction Co. 305 Mass. 144, 146. See also Faber v. Hovey, 117 Mass. 107. As soon as an appeal

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has been claimed, and before the final decree is vacated by entry of the appeal in this court, a statutory power arises in the court that entered the decree and also in this court, to grant any needed injunction and to make any other proper interlocutory order, pending the appeal. [Note p190-1] G. L. (Ter. Ed.) c. 214, Sections 21, 22. Old Dominion Copper Mining & Smelting Co. v. Bigelow, 203 Mass. 159, 221. Stathopoulos v. Reeksting, 252 Mass. 542, 544. Coral Gables, Inc. v. Granara, 285 Mass. 565, 570. Boston v. Santosuosso, 308 Mass. 202, 210. Seder v. Kozlowski, 311 Mass. 30, 40. These provisions make unnecessary, in the case of an appeal from a final decree, any automatic continuance in force after final decree of a preliminary injunction.

or not it was properly granted. We have no occasion either to reverse or to affirm that interlocutory decree, for it has no effect upon present rights.

The interlocutory decree permitting the Attorney General to intervene is affirmed. The final decree is modified so that it will enjoin and restrain the respondents permanently only from furnishing, or advertising or undertaking to furnish, for a consideration, legal services, and will give costs to the petitioners. As so modified it is affirmed.

[Note p184-2] Treasury Circular 230, as revised to October 23, 1941, allowing practice before the Treasury Department by enrolled attorneys and certified public accountants. Rule 2 of the former United States Board of Tax Appeals. Rule 2 of the Tax Court of the United States, which provides for the admission to practice after examination of citizens, without restriction to members of the bar or certified public accountants. U. S. C. Title 26, Section 1100, as amended by Act of October 21, 1942, c. 619, Title V, Section 504 (a) (56 U.S. Sts. at Large, 957). Such rules were recognized as valid in Goldsmith v. United States Board of Tax Appeals, 270 U.S. 117, and Crane-Johnson Co. v. Commissioner of Internal Revenue, 105 Fed. (2d) 740, 744. See also Journal of Accountancy, Vol. 64 (1937) 127, 130; Vol. 72 (1941) 45; Vol. 74 (1942) 470.

[Note p189-1] In other jurisdictions the general rule is that an injunction, other than a mandatory one, granted by a final decree, is not vacated by an appeal. Hovey v. McDonald, 109 U.S. 150. Leonard v. Ozark Land Co. 115 U.S. 465. Helbig v. Phillips, 109 N. J. Eq. 546, 93 Am. L. R. 706, and note.